According to the United States Courts, the number of bankruptcies filed in the U.S. in 2022 dropped to 387,721 from 413,616 the year before. Even though it looks like fewer people are taking this path, filing for bankruptcy may still be the best option for you.
Making the choice to file for bankruptcy is a significant financial decision that requires careful consideration of your circumstances. These signs can help you decide when it is best to file for bankruptcy.
Signs that bankruptcy might be right for you
Several signs might indicate that it is time to file for bankruptcy:
- Overwhelming debt: If your debts have become unmanageable, and you are struggling to meet your obligations despite your best efforts, bankruptcy could offer relief.
- Impending foreclosure: If you are falling behind on mortgage payments and facing the risk of losing your home, bankruptcy might help you avoid foreclosure.
- Relentless creditor communication: Constant calls from bill collectors can be stressful. Bankruptcy can put a stop to these calls and provide a fresh financial start
Bankruptcy does not have to be the last option. If any of these situations is on the horizon, now is a good time to consider whether bankruptcy is the right choice for you.
Types of bankruptcy
Bankruptcy law provides two main options for individuals: Chapter 7 and Chapter 13. Commonly referred to as liquidation bankruptcy, Chapter 7 involves selling some of your property to repay creditors. The court will exclude several assets, like your vehicle, clothing and essential household items, from this process.
Chapter 13 bankruptcy involves creating a court-approved plan to repay your debts over a span of three to five years. It allows you to keep your property as long as you make agreed-upon payments.
Choosing to file for bankruptcy should be a well-informed decision based on your unique financial circumstances. It offers a chance to regain control of your financial situation.